A Massachusetts federal jury in May awarded $70 million to CardiAQ after finding that Neovasc misappropriated trade secrets in developing its Tiara transcatheter mitral valve replacement device. Edwards inherited the lawsuit when it acquired CardiAQ Valve for $400 million in August 2014. That pushed NVCN shares down some -75% and prompted shareholder Sergio Grobler to file a purported class action lawsuit against Neovasc on behalf of Neovasc stock owners who bought from Neovasc’s January 2015 initial public offering to the date of the May 19 verdict. (The judge overseeing the CardiAQ Valve suit against Neovasc later added $21 million in damages for willfulness).
Neovasc moved to have the investor lawsuit dismissed, arguing that its statements that the CardiAQ Valve lawsuit was baseless and without merit were forward-looking and thus protected by the “safe harbor” created by the The Private Securities Litigation Reform Act of 1995.
Judge Richard Stearns of the U.S. District Court for Massachusetts agreed, finding that statements by Neovasc in regulatory filings, and by executives during earnings calls, were protected by the safe harbor provision.
“Neovasc’s filings both frankly acknowledged the uncertain long-term prospects of the Tiara device and explicitly referred to the pending CardiAQ suit. In the prospectus supplement, for example, investors were told that the Tiara was not currently revenue-generating, and were warned that ‘[t]here is no certainty that the Tiara device will successfully proceed through clinical testing and ultimately receive regulatory approval,'” Stearns wrote. “Neovasc also stated that an adverse outcome in the CardiAQ litigation could cost the company substantial sums and lead to an ‘inability to market our products including the Tiara product.’ The PSLRA requires no more.”